Global Banking and Markets Citi Reverse Roadshow

Global Banking and Markets Citi Reverse Roadshow Samir Assaf Group Managing Director, Chief Executive, Global Banking and Markets Date: September 2012...
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Global Banking and Markets Citi Reverse Roadshow Samir Assaf Group Managing Director, Chief Executive, Global Banking and Markets Date: September 2012

Forward-looking statements

This presentation and subsequent discussion may contain certain forward-looking statements with respect to the financial condition, results of operations and business of the Group. These forward-looking statements represent the Group’s expectations or beliefs concerning future events and involve known and unknown risks and uncertainty that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Additional detailed information concerning important factors that could cause actual results to differ materially is available in HSBC Holdings plc Annual Report and Accounts 2011 and Interim Report issued on 30 July 2012. Past performance cannot be relied on as a guide to future performance. This presentation contains non-GAAP financial information. Reconciliation of non-GAAP financial information to the most directly comparable measures under GAAP are provided in the ‘Reconciliation of reported and underlying profit before tax’ supplement available at www.hsbc.com.

2

HSBC Group management matrix

Middle East & North Africa

RBWM

Retail Banking & Wealth Management (RBWM)

CMB

North America

Commercial Banking (CMB)

GBM

Hong Kong & Rest of Asia Pacific

Global Banking & Markets (GBM)

GPB

Europe

Global Private Banking (GPB)

Latin America

Global Functions Communications

Company Secretary

Corporate Sustainability

Finance

HR

Internal Audit

Legal

Marketing

Risk & Compliance

Strategy & Planning

Global Business

Region

3

Four integrated Global Businesses • 1H2012 net operating income USD8,253m1 • FY2011 net operating income USD15,611m1 • 2009 - 2011 cumulative PBT USD18,312m1 • 2011 RWAs USD382.9bn1

Commercial Banking

Retail Banking and Wealth Management

• 1H2012 net operating income USD19,315m1 • FY2011 net operating income USD33,533m1 • 2009 - 2011 cumulative PBT USD6,263m1 • 2011 RWAs USD351.2bn1

• 1H2012 net operating income USD10,335m1 • FY2011 net operating income USD17,057m1 • 2009 - 2011 cumulative PBT USD26,526m1 • 2011 RWAs USD423bn1

Global Banking and Markets

Global Private Banking

Notes: 1 On a reported basis. Net operating income is before loan impairment charges and credit risk provisions.

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• 1H2012 net operating income USD1,641m1 • FY2011 net operating income USD3,292m1 • 2009 - 2011 cumulative PBT USD3,106m1 • 2011 RWAs USD22.5bn1

How we are structured

Global Banking and Markets Coverage Groups

GBM

Clients – over 4,000 mastergroups1 Client coverage teams – over 2,500 people1

    

FX Credit Rates Equities Asset & Structured Finance

    

Credit & Lending Equity Capital Markets (ECM) Project & Export Finance Leveraged & Acquisition Finance Advisory

Commercial Banking (CMB) Over 50,000 corporate mastergroup clients1

Clients

 

Payments & Cash Management (PCM) Securities Services Trade and Receivables Finance (TRF)

Retail Banking & Wealth Management (RBWM) c. 4.3m Premier customers1

Products / Business

Note: 1 HSBC internal management information as at 30th June 2012



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Balance Sheet Management (BSM)

Global Private Banking (GPB) c.100,000 private banking clients1

GBM strategy is underpinned by trends in growing international trade and capital flows Major trade flows1 2011

Country Trade Growth2 Imports and Exports, USDtn CAGR 2011-2021

Intra-regional trade: Europe 29.5% Intra-regional trade: North America 3.5%

China

3.6

USA

3.7

Germany

6.7

Middle East

5.9%

Intra-regional trade: Asia Pacific 17.1%

Latin America

5

2

India 0.7

11 6

2.8

2.9

%

16

2.4

South Korea

1.1

1.5

9

UK

1.1

1.4

9

Italy

1.1 1.4

8

Japan

1.6 0.8

4

France 1.3 0.9

6

Netherlands 1.0 0.9

6

Hong Kong 0.9 0.9

7

Intra-regional trade Inter-regional trade

Comments  Developed markets still play a vital role in global trade: – Top 15 countries account for 69% of global trade growth from 2011-2014 – 5 most important trade flows in 2011 are intra-regional Europe, intra-regional Asia, between Asia and Europe, between Asia and North America and between Asia and the Middle East. – Large increase of South-South business flows

Mexico 0.7 0.9

9

Canada 0.9 0.7

6

Singapore 0.7 0.8

8

Russia 0.8 0.6

5

Other Total

14.1 35.3

38.4

2011 Notes: 1 IMFDOTS, based on FY2011 share of total exports across 183 countries 2 Global Insights March 2012, total imports and exports merchandise trade

6

6

11.8

Grow th 2011-2021

8

GBM strategy is aligned to the strategy of the Group

Group Strategy

International trade and capital flows

GBM Strategy

 International network in markets that matter  Build on international trade and commercial banking heritage

 International network connecting emerging and mature markets, covering key growth areas Emerging markets led

Financing focused

Economic development and wealth creation

 Most relevant markets for wealth creation  Retail banking only where we can achieve profitable scale

Note: 1 HSBC internal management information as at 30th June 2012

 4 main hubs and 6 strategic hubs

 Simple financing led product set, including: – Credit & Lending – Debt Capital Markets / Equity Capital Markets – Project and Export Finance – Asset Structured Finance

 Connectivity emphasis

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Franchise client focus including: – Global Banking: over 4,000 mastergroup clients1 – CMB: over 50,000 corporate mastergroup clients1 – RBWM: c. 4.3m Premier customers1 – GPB: c.100,000 private banking clients1

Strong GBM financial performance diversified by product and geography Average 2009-2011 Managed View of Operating Income1 % average 2009-2011

Profit Before Tax1 % average 2009-2011

Total: USD19bn

Total: USD9bn

Credit (8%)

Europe (28%)

Rates (11%) FX (16%)

Hong Kong (15%)

Equities (4%) Securities Services (8%)

RoAP (30%)

Asset and Structured Finance (2%) Financing and ECM (16%)

MENA (5%)

PCM (6%) Other Transaction Services (3%)

North America (12%)

BSM (23%) Principal Investments (1%)

Latin America (10%)

Other (2%)

FY 2011 Cost Efficiency Ratio: 57% FY 2010 Cost Efficiency Ratio: 49% FY 2009 Cost Efficiency Ratio: 38%

FY 2011 Return on RWAs2: 1.8% FY 2010 Return on RWAs2: 2.5% FY 2009 Return on RWAs2: 2.6%

Notes: 1 On a reported basis 2 FSA, Basel II basis. 2011 ex-GBM legacy RWAs were USD373bn and RoRWA was 2.1%.

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FY 2011 RWAs2: USD423bn FY 2010 RWAs2: USD353bn FY 2009 RWAs2: USD394bn

Strong GBM financial performance diversified by product and geography 1H 2012 Managed View of Operating Income1 % 1H 2012

Profit Before Tax1 % 1H 2012

Total: USD10.3bn

Total: USD5.0bn

Credit (4%)

Europe (21%)

Rates (17%) FX (17%)

Hong Kong (16%)

Equities (4%) Securities Services (8%)

RoAP (34%)

Asset and Structured Finance (2%) Financing and ECM (15%)

MENA (6%)

PCM (8%) Other Transaction Services (4%)

North America (11%)

BSM (21%) Principal Investments (1%)

Latin America (13%)

Other (-1%)

Return on RWAs2: 2.4%

Cost Efficiency Ratio: 49.1%

Notes: 1 On a reported basis 2 Pre-tax return on average RWAs (annualised)

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Diversified and resilient client base Financial Institutions Relationship Revenue Split by Product1

Asset and Structured Finance

DCM Securities Services

Rates

Financial Institutions Corporates Equities

Payments and Cash Management Asset Management

FX Credit & Lending

Gov ernment

Financial Institutions Relationship Revenue Split by Customer Segment1 Portfolio TCG

Other

Reserve Managers

Insurance

Financial Institutio ns Co rpo rates

Banks Hedge Funds

Securities Cos & Others Global Finance Companies Fund Managers

Go vernment Note: 1 HSBC internal management information as at 31 December 2011

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HSBC derives a larger quantity of its FX activity from non-FI clients than any other competitor Euromoney 2011 FX Survey1 Non-FI FX volume as a proportion of each bank’s total FX volume (with banks’ average rebased to 1) 2.19

Bank 1

1.88

Bank 2

1.72

Bank 3

1.03

1.00

Average 10 banks Bank 4

0.79

Bank 5

0.73

Bank 6 Bank 7

0.52

0.50

Bank 8 Bank 9

Euromoney 2012 FX Survey1

0.60

0.42

Note: 1. Source: Euromoney (based on the results for the year preceding the survey) – FI are banks, leveraged fund and real money clients transacting at least USD50m in G10 and USD20m in EM.

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Ranked 5th globally



Market share – 6.72%

Synergies with Global Businesses to generate increasing revenues

Size of opportunity

 Commercial Banking

Retail Banking and Wealth Management

Over 50,000 corporate mastergroup clients1

c. 4.3m Premier customers1

   

 

 Global Private Banking

c.100,000 private banking clients1 

Note: 1 HSBC internal management information as at 30th June 2012

Potential upside in the medium term

Initiatives Aspiration: increase incremental revenues in the medium term – which, in 2011 alone, resulted in c.USD500m in incremental revenues. 16% rise in collaboration revenues in 1H 2012 Global initiative for FX Referrals for Event products Joint Client-led Planning

Wealth Management Solutions: selling GBM products to RBWM customers, particularly Wealth-related products e-Commerce

Institutional Private Client Group within GBM and the Global Priority Client structure within GPB to jointly cover Ultra High Net Worth+ Individuals GBM referrals to GPB

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A significant proportion of the potential USD2bn upside will be driven by CMB and GBM collaboration

GBM – Wholesale banking industry is changing and facing profitability challenges Industry changes in product profitability ROE, %

Post-regulation and post-mitigation

Pre-regulation 30

FX

Struc. Equity Derivs.

c.11-12

15

20

c.11

25

Flow Credit

 Client activity relatively subdued with global investment banking revenue pool forecasts for flat to moderate growth, in the medium term  Regulatory changes reducing available capital and liquidity

c.11-12

Flow EQD

Structured Credit

c.12-13

19

Commodities

Structured Rates

c.18

27

Flow Rates Prime Services

c.19

25

Cash Equities

Industry challenges

c.11

18

c.10-11

c.7-8

15

c.7.8

17

Industry-wide structurally challenged businesses

10

Source: McKinsey report “Day of Reckoning? New Regulation and Its Impact on Capital-Markets Businesses”, September 2011

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 Overall downward pressure on returns

GBM regulatory challenged products represent 14% of total operating income1 Challenged products

GBM Total Operating Income2 ex. BSM and Other

Average, USDm

Share of 2011 Total Operating Income, %

Foreign Exchange

3,005

24%

Financing & ECM

2,983

24%

Rates

1,873

10%

Securities services

1,729

12%

PCM

1,403

11%

Equities

694

7%

Other transaction services

526

5%

Asset and Structured Finance

407

4%

Principal Investments

282

2%

Credit

-501

2%

Minimum, Maximum and Average 2007 – 2011, USDm

(1) Excluding BSM and Other (2) Before loan impairment charges and credit risk provisions

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RWAs and Legacy Credit

Legacy

 Actively managing down legacy exposure  In 2011, disposal actions taken to mitigate USD7bn RWA increase; but RWAs increased USD24bn largely due to regulatory changes  Clear economic framework for hold versus dispose decisions

RWAs

Industry changes in product profitability

 Comprehensive RWA mitigation actions underway  Trading inventory being managed down  Optimising RWA consumption

Decision framework Hold Expected loss on sale + transaction costs

NPV of future cash flows Sell

   

NPV considers terminal value, net of funding and operational costs as well as Cost of Capital Capital charge for projected RWAs assumes 10-15% Core Tier 1 requirement Cost of Capital specific to GBM; determined using various economic factors Additional consideration for redeployment of capital 15

Transaction banking is a core and strategic product delivered to GBM clients    

Benefits from stable annuity-like revenues with further NII upside from interest rates increase Supports both Group and GBM’s liquidity position Strategic product with strong cross-selling potential for other products (e.g. FX, Credit & Lending) Low capital usage with double-digit Return on Equity



Best Cash Management Bank in Asia and Middle East, Best Global Cash Manager for Fin. Inst. (2011)





Securities Services

Payments and Cash Management

Market leadership in our product suite

 

Trade and Receivable Finance

Best Sub-Custodian: 10 countries Best Domestic Custodian: 5 countries

 

No.1 Cash Management Bank in Asia and the Middle East and No.2 in Latin America, No.1 Global Best Cash Manager for Financial Institutions and No.2 Global Best Cash Manager for Corporates1 Stable revenues with over 3,000 mastergroup GBM clients globally

HSBC Securities Services (HSS) provides Global Custody, Sub-Custody, Fund Administration and Corporate Trust & Loan Agency (CTLA) services HSS plays a key role in providing end-to-end securities solutions Over 1,800 mastergroup GBM clients in over 40 countries with a leading position in Custody and Clearing in the UK, Asia and the Middle East

Facilitates global trade flows through international connectivity Leading Trade and Receivables Finance franchise in Asia

Best Trade Finance House 2011

Note: 1 Euromoney 2012 (based on the results for the year preceding the survey)

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Payments & Cash Management is a key funding engine

HSBC payments grow faster than global payments Global payment volumes1 (m) CAGR +8%

4,165

 Continued strong growth in GBM’s contribution to PCM revenues – USD0.9bn 1H 20122.

3,841 3,579

2009

2010

2011

 Comprehensive product set anchors relationships and underpins international connectivity

HSBC payment volumes1 (m) CAGR +14% 166

142

127

2009

2010

 Attractive financial attributes including low capital usage, high returns and significant barriers to entry

2011

PCM revenues – GBM contribution2 (USDbn)

 Strong franchise value and annuity revenue stream

CAGR +17% 1.1

1.1

1.5

2009

2010

2011

Notes: 1 Number of SWIFT payment messages sent and received 2 GBM revenues on a reported basis

0.9 1H12

17

The world’s leading Trade Finance bank1

World nominal GDP2 (USDtn) CAGR +10% 70

63

58

2009

2010

 Trade financing provides access to the wider corporate relationship

2011

 Our network provides access to 77% of world trade flows

World merchandise trade2 (USDtn) CAGR +20% 24

2009

30

35

2010

2011

HSBC trade finance revenues – GBM (USDbn)

 HSBC is the world's leading trade bank with 9% global market share1  We are capturing further growth opportunities as competitors deleverage

contribution3

CAGR +22.5% 0.4

0.5

0.6

2009

2010

2011

Notes: 1 Oliver Wyman Global Transaction Banking survey 2011 2 Global Insights (March 2012); Merchandise imports and exports and Nominal GDP 3 GBM revenues on a reported basis

0.4 1H12

18

Strength in core product capabilities – Market related flow products Market leadership in our product suite      

Strength in vanilla flow, G10 FX, Credit1, Rates2 Top tier primary bond position in Asia, Latin America and Europe and leading secondary trading capabilities Innovative Client solutions, including RMB development and Shariah Compliant Finance Continued leadership in Precious Metals A very active pipeline year to date with a number of significant transactions across all regions Consistent recognition and success in Market Surveys and Awards

Bloomberg key league tables All International Bonds Euromarket Corporates Sterling Asia-Pacific ex Japan Asian Local Currency Offshore RMB Islamic Bonds Latin America Bonds

2011 4 4 3 1 1 1 3 1

2012 YTD 4 2 4 1 1 1 1 1

Euromoney Rates Survey 2012 No logo



Source: Euromoney, July 2012

• •

#5 Overall market share #5 Swap market share

Market share by institution type

#1 Euro cash 2-5 year

Overall client satisfaction ratings



• •

Qualitative rankings - currencies

• •

#1 Ability to deal with large volumes/transactions #1 Liquidity consistency

• • • •

#1 Inflation-linked bonds overall #1 Inflation-linked derivatives



• •

#1 Cross currency swaps

Client satisfaction ratings by corporates • • • •

• •

#2 Asian currencies #2 Latin American currencies #2 Middle Eastern currencies #2 African currencies #2 Americas timezone #2 Asia timezone

Qualitative rankings - research

#1 Ability to deal with large volumes #1 Economic Research #1 Liquidity consistency #1 Market research/strategy

Client satisfaction ratings by financial institutions

#2 Non-financial corporations

Qualitative rankings – client service

Other products

Euromoney Awards for Excellence 2012 Best Global Emerging Markets Bank Best Global Emerging Market Debt House Best Global Sovereign Advisor Best Debt House in Latin America Best Flow House in Latin America Best Risk Advisor in Western Europe Best Debt House in Asia Best Flow House in Asia Best Risk Advisor in Asia Best Debt House in the Middle East Best Equity House in the Middle East Best Flow House in the Middle East

Overall results

No logo

Inflation-linked products

Source: Bloomberg (17 Aug 2012)

• • • • • • • • • • • •

Overall by currency/ product/maturity

Euromoney FX Survey 2012



#1 Emerging Markets

Qualitative rankings - trading • Source: Euromoney, May 2012

#1 Liquidity consistency #1 Sales coverage/client service

#2 Currencies emerging market trading – spot/forward

Euroweek Asia Awards 2011 Overall Awards • • •

Source: Euromoney, March 2012

Best bank to work with across all markets Best advice across all markets Best bank for execution across markets

Source: Euroweek, February 2012

Notes: 1

HSBC has maintained its position as #1 lead-manager of EM debt globally; #2 in Euromarket corporate space (source: Bloomberg); RMB: Continuing leading position. Key deals include first London Issue outside China and Hong Kong: HSBC self led 3 year RMB bond listed and traded on LSE.

2

#1 bookrunner in Supra-Nationals, Sovereigns and Agencies for 2009-2012 YTD (source: Bloomberg); Rank top three across USD, EUR and GBP in all SSA 2012 YTD. Recent Euromoney Survey, No. 1 in 19 categories.

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Strength in core product capabilities – Event products

Rankings

2012

Equity Capital Markets1

9

Export Finance (Global MLA)2

1

Project Finance3

3

M&A (cross border into EM)4

10

Sinopec

Sole Financial Adviser to Sinopec on the acquisition of a 49% interest in Talisman’s UK subsidiary

A landmark transaction that reinforces HSBC’s leading cross-border advisory capabilities Schaeffler EUR8bn Senior secured credit facilities Mandated Lead Arranger and Bookrunner. Included a EUR2bn bridge to capital markets take-out in which HSBC acted as Joint Global Coordinator and Joint Physical Bookrunner

Strong collaborative efforts across products, sector and geographies 1 2 3 4

Business highlights  Our Asian ECM business has seen significant market share improvements in Hong Kong, Singapore and India  Leveraged and Acquisition Finance continues to use its strong balance sheet to support clients’ loan financing requirements, and to grow market share  Leveraged and Acquisition Finance is delivering and executing the strategy of building the high yield capability with notable market share gains within EMEA

Acquisition of CPA Global by Cinven Financial Adviser to Intermediate Capital Group. Global Coordinator, Mandated Lead Arranger and Physical Bookrunner for the GBP555m financing backing the acquisition Close collaboration between Global Banking and Commercial Banking and across multiple products and clients UniCredit EUR7.5bn rights issue Joint Bookrunner

2nd largest global equity issue in 2012YTD - represents an essential step in the recapitalisation of the European banking sector post the EBA stress tests

Source: Dealogic. Global view excluding North American, Australian and Japanese issuers and Chinese A-share transactions. Ranking by Global Coordinator or Bookrunner, based on apportioned deal value Source: Dealogic Source: Dealogic (Global Adviser of Project Finance Loans) 20 Source: Bloomberg

Equities will continue to target opportunities in chosen markets  The Global Equities targeted approach by country, core or relevant in selected markets, aligned with Research and Banking is the right one and will continue  Equities wallet share increased in all relevant markets between 2008 and 2011, particularly in Europe and Asia, while the global institutional wallet shrank7  Overall Pan European ranking has advanced to 6th position (10th in 2011)6  Top 5 EMEA1 ranking for 7 Sectors Sales and 6 Generalist Sales6  Top 5 CEEMEA2 ranking in Metals & Mining, Telecommunications, Oil & Gas and Strategy and Economics6  ECM: #3 position in Hong Kong 20114

Neither niche nor bulge bracket

Equities - league table targets

Neither niche nor bulge bracket Core (Top 5) Niche

Bulge

EMEA

Asia-Pacific

North America  International Distribution Platform Latam  Manufacture and Access to Brazil and Mexico

Develop Europe  Manufacture and Access to largest markets: UK, France, Germany Emerging Markets  Manufacture and Access to GCC5, Turkey, South Africa, Russia

Asia  Manufacture and Access to India, China, Taiwan, Korea, Hong Kong Japan  Reduced to execution only

Notes: 1 Defn: Europe, Middle East and Africa 2 Defn: Central and Eastern Europe, Middle East and Africa 3 Source: McLagan 4 Source: Dealogic 5 Defn: Gulf Corporation Council 6 Source: Extel 7 Bloomberg

Top 5

India

Top 5

Middle East3

Top 3

Brazil

Manufacturer and Distributor of Product America

China3/Hong Kong

Mexico

5th – 8th Top 5 Relevant (Top 10)

UK France Germany Singapore Korea Taiwan

21

Top 10

BSM revenues stabilising after two exceptional years

Balance Sheet Management Revenues (USDm)  BSM has a clear governance structure

3,350

3,500

 BSM does not manage structural credit risks

3,000 2,500

2,269 1,988

2,000

2,206

2,040 1,833 1,765 1,723

1,630

 Counterparty risk is mostly short term exposure to central banks and government bonds

1,500 1,000

 BSM manages the transformation of interest rate risks with an overall objective of having duration exposure within a clearly defined risk mandate

705 521

500 0 2007 H1

2007 H1

2008 H1

2008 H2

Half-yearly average USD1,211m

2009 H1

2009 H2

2010 H1

2010 H2

Half-yearly average USD2,373m

2011 H1

2011 H2

2012 H1

Half-yearly average USD1,898m

22

Clear competitive advantages in response to regulatory change

Structural Reform – ICB/ Volcker

Execution and Clearing

Capital and Liquidity Changes

Impact

Concerns

Strengths

 Leverage in ring-fenced bank  Minimum loss absorbing capital requirements  Prohibited activities

 Precise composition of ringfenced bank  Geographic reach  Liquidity impact  Cost and compliance implications

 Ability to service customers from subsidiary balance sheets  De-minimis proprietary trading

 Clearing mandated for liquid OTC contracts  Risk mitigation for un-cleared trades  Trading of liquid OTC contracts on exchange-like venues

 Central counterparty exposure  Extra – territoriality  Market requirement for liquid assets

 Scale of existing custody and execution businesses  Strong balance sheet  Impact on derivatives business is minimal

 Higher capital charges for market and credit risk  ‘G-SIFI’ surcharge based on resolvability

 Increased CVA charges  Capital charges for clearing members

 HSBC at forefront of liquidity management  Subsidiary structure facilitates orderly resolution

Robust regulatory change programme in operation

23

Disciplined approach to risk appetite for capital market activities

 Overall Strategy and Risk Appetite is set first by the HSBC Board and ultimately defines the shape of our capital markets activities  Chief Risk Officer is actively involved in the Strategy setting and the Five Filters have critical risk dimensions which in effect set the risk shape of the global businesses / capital markets activities  The Global Risk Appetite Statement sets granular quantitative risk appetite metrics within which the Group and its global businesses must operate  Global Banking and Markets ExCo1 and RMC (Risk Management Committee) establish the risk appetite statement for GBM which must align and be consistent in all areas with the Group Risk Appetite Statement  RWA targets for GBM as a subset of the global target RWA level ensures appropriate focus on returns and drives a discipline of reducing exposures in high risk / legacy businesses  Global Market Risk Limits establish further granular boundaries across GBM businesses  Risk appetite for capital markets activities must also line up with the Group's Reputational Risk Appetite  Group Risk Management Meeting uses business deep dives to further review, challenge and shape the risk appetite for capital markets activities Note: 1 GBM Executive Committee

24

Other key committees

Senior Management Committees

Senior Oversight Committees

GBM Governance Structure Overview (simplified)

Legal Entity Committees GBM Audit & Risk Committee (Group Level Oversight – Chaired by David Shaw, Advisor to the Holdings Board)

(HSBC North America Holdings Inc, Hongkong and Shanghai Banking Corp Ltd, HSBC Bank plc, HSBC Latin America Holdings Ltd, HSBC Bank Middle East Ltd etc)

GBM Executive Committee

Management Committee

Risk Management Committee (RMC)

(Regions, GB, GM, PI, Research, Infrastructure etc)

(including regional RMCs)

Deal Prioritisation Committee (DPC)

Transaction Review Committee (TRC)

Operational Risk & Internal Control (ORIC) Committee

Reputational Risk Committee (RRC)

New Product Committee (NPC)

New Business Committee (NBC)

Asset Liability Committee (ALCO)

Global Portfolio Crisis Planning and Monitoring Committee

Plus various other Product Excos, sub-committees and regional committees that ultimately report into the key committees as part of the overall global GBM governance structure

25

Why you should own HSBC

The world is changing . . . Long-term trends  Increasing imbalances in international trade and capital flows  Rebalancing of the world economy towards faster growing markets

HSBC’s distinctive position 1. Privileged access to growth opportunities (cohesive portfolio)  International network supporting our Commercial Banking and Global Banking and Markets businesses  Exposure and meaningful presence in the most attractive growth markets for Wealth and Retail Banking

Clear strategy and execution focus  Strategy driving capital allocation  Action plan

2. Four global businesses sharing strong commercial linkages Regulation  Recovery and Resolution  Dodd Frank, ICB, . . .

3. Lean and values driven organisation fit for the new environment 4. Strong balance sheet supported by diversified deposit base and generating resilient stream of earnings

26

 Experienced and committed management team

Appendix

Appendix GBM league table rankings1 show strengths in Asia, MENA, Latam in Transaction Banking, Global Banking and vanilla Global Markets products Transaction Banking

PCM

Securities Services

Global Banking Project & Export Finance

Hong Kong RoAP ex. Japan

Global Markets

ECM

M&A

#3

#2

FX

DCM

MENA #6

#1

#1

#1

Equities #5

#7

#10

#6

#1

#5

#1

#3

n/a

#1

#2

#13

#3

#1

#4

n/a

n/a

#3

#9

#7

#12

#16

n/a

Latam

#2

UK

n/a

n/a

#9

Cont. Europe

n/a

#10

n/a

North America

n/a

n/a

n/a

#1

Top 5

Top 10

28

n/a

#4 #6

Sources: 1 Dealogic 2011/2012, Bloomberg 2011, Extel 2011, Greenwich 2011, Euromoney 2011

Credit

#1 #1

#1

Rates

#2 #10

#11

Outside Top 10

Appendix GBM Financials Half-year to 30 Jun 2012

Half-year to 30 Jun 2011

370

530

Rates

1,805

1,355

Foreign Exchange

1,733

1,517

Equities

396

612

Securities Services

818

854

Asset and Structured Finance

212

278

Global Markets

5,334

5,146

Financing and Equity Capital Markets

1,526

1,664

Payments and Cash Management

874

695

Other transaction services2

385

311

Global Banking

2,785

2,670

Balance Sheet Management

2,206

1,765

147

175

(137)

(67)

10,335

9,689

Management view of net operating income1 (USDm) Credit

Principal Investments Other3 Total operating income Notes: 1. Figures prepared on a reported basis and Net operating income before loan impairment charges and other credit risk provisions 2. Trade Services, Bank Notes and Cards Issuing 29 3. Includes certain liquidity charges and net interest earned on free capital allocated to GBM